Builders of Wooden Railway Cars ... and some of other stuff

The Streetcar Builders Consolidation

On 2 May 1905, the following article appeared in the New York Times
—

TO UNITE CAR
BUILDERS——————————Syndicate with $50,000,000 Capital Being Formed

BOSTON, May 1. — A
movement to merge the companies engaged in the manufacture of street
railway cars of the entire country is in progress. Options have been
secured on properties, including that of the Laconia Car Company of
this city and Laconia, N.H.

Among the concerns
interested are the J.G. Brill Company of Philadelphia, the St. Louis
Car Company, the Wason Manufacturing Company of Springfield, Mass.;
the Bradley Car Company of Worchester, Mass., and the Jewett Car
Company of Newark, Ohio. A capital of about $50,000,000 is proposed.

According to men
identified with streetcar manufacturing interests in this State,
profits have not been large in the past half dozen years, owing to
keen competition, although the demand for cars has been the greatest
ever known.

An article that same day in the Boston Daily
added the information that —

o

the total volume of streetcar-building business was estimated
to be between $12 million and $15 million annually.

o

due to extensive competition, profit margins were too small
for the smaller companies to survive.

o

Stephenson, American and Kuhlman had all failed within the
last few years.

o

Osgood Bradley had gone into liquidation and Laconia had to be
reorganized.

o

one benefit claimed for consolidation would be larger profits.

o

another benefit of consolidation would be savings in freight
rates by having plants in all sections of the country.

o

the railways would benefit through prompt shipment and the
pooling of patents.

Three weeks later, a dispatch from St. Louis said, “the deal . . . has
been practically closed.” It indicated that George J. Kobusch of the St. Louis
Car Company—largest of the companies involved—had been “prominent in [the] negotiations,”
which had been principally carried on through James Stewart of the St. Louis
firm of James Stewart & Company. He was said to be “in the East closing the
final details of the deal, and it was through him that options on the various
car manufacturing plants in the leading cities were obtained.” These options
would expire 1 July, but had a possible six-month extension. “The central
organization will have control of the combined plants, practically purchasing
the various plants, the present owners and management in many instances
retaining an interest in the stock of the consolidated companies.” The Newark Advocate version of this dispatch
named the 15 companies checked with an “a” in the table below (though not
necessarily by the exact same name). The
New York
Times version named the 15 companies checked with an “n”.
{412}

Apparently the “deal” did not go through on July 1st, as on the 20th
another newspaper {413}
reported receiving a dispatch from New York announcing the progress of the
“mammoth trust.” This report said there were 17 “concerns” in the combine, but
double counted two of them. [The firms it named are marked with a “c” in the
following table.] The report also suggested that “the contractor of
international note,” J.C. Stewart, “engineered the deal and will be president
of the holding company controlling the business and output of these seventeen
concerns.”

The Washington Post reported a
dispatch from New York dated July 28th saying a company is “now being formed.”
[Emphasis added.] {415}
This dispatch indicated the capital would be $43,000,000, consisting of
$15,500,000 of 6% cumulative preferred stock and $27,500,000 of common stock.
Supplementing the stock would be an issue of bonds in the amount of
$13,000,000 secured by a first mortgage and collateral trust sinking fund
bearing 5%, $11,0000,000 to be issued at formation of the company and
$2,000,000 reserved for future requirements. The dispatch also named 19 participating companies,
including three not named on any previous list (the Easy Access Door Company,
the Journal Bearing Company, and the Wilson Manufacturing Company,
although the last may be a confusion with the Wason Manufacturing Company.)

A New
York Times article of that
same date said specifically the combination
“has been formed.” [Emphasis
added.] It noted that Kean, Van Cortland & Company were the syndicate managers
of the merger. Also that William T. Van Brundt, president of the Furnaceville
Iron Company, the St. Joseph & Grand Island Railway Company, and the
Sinnemahoning Iron & Coal Company [all Harriman properties] “is also
interested in the deal.” This article said the Capital would be $54,500,000,
divided among $15,500,000 of preferred stock, $27,500,000 of common stock, and
$11,500,000 in bonds. It also claimed to have heard that Barney & Smith was
included in the combine.

An article in the Chicago Daily Tribune
for July 30th, based on an interview with John J. Cummings, president of the
Chicago Car Company (Cummings Chicago Car Company in the table below), had
both additional information and corrected information.

o

Cummings asserted the purpose of the “consolidation” was to reduce
operating expenses and “ruinous freight rates,” rather than to boost
prices.

o

An updated list of participating companies, 14 in all, is given. These
are checked “t” in the table below. [Note that Jewett, Niles and
Stephenson have apparently dropped out.]

o

Financial information was brought up to date: capital would now be a
total of $54,000,000, consisting of $11,000,000 in 5% bonds, $15,500,000
in preferred stock and $27,500,000 in common stock. Underwriting was being
handled by Kuhn, Loeb & Company, Martin Brill, T.J. Dolan, Thomas F. Ryan,
E.H. Harriman, George Kobusch, “and others.”

o

Officers had yet to be elected, but Cummings expected either W.G. Van
Brunt or J.C. Stewart to be elected president. Van Brunt was described as
“Harriman’s man,” managing some of his railroad properties. [James C.
Stewart, you may recall, was a “contractor of international note,” friend
of George Kobusch of the St. Louis Car Company, and reportedly “engineered
the deal.”] Cummings expected to be elected vice-president.

o

Finally, Cummings estimated the combine would control 95% of the
streetcar business in the United States.

For the next four months there was a dearth of news concerning the
combine. But then comes another dispatch, this one from Cleveland, dated December 2nd,
indicating that the combine “originated in the offices of Thomas Ryan of
Philadelphia and George Kobush [sic] of St. Louis,” was about to be completed
in Cincinnati, and that Randal Morgan of Philadelphia was “to figure in
bringing the deal to a successful end.” Henry C. Ebert of Pittsburg was “said
to have been selected as the head of the new combine,” and would “make
Cincinnati his headquarters.” This report suggested the plan had been the
brainchild of George Kobusch of the St. Louis Car Company, who had “laid the
matter” before Mr. Ryan, a member of the Natural Gas Improvement syndicate. It
also noted the “underwriting has all been arranged for and the delay was
caused by the fact that the syndicate had a number of other large deals under
way which it was desired to get cleaned up.” {414}

Then . . . deafening silence: we can find nothing further about the great
$50 million merger in any newspaper archive available to us. What happened?

Reading between the lines, (and above and below as well) it appears that
after much planning, politicking and maneuvering, someone
awoke to the reality that such a consolidation would simply not be allowed to
happen. President Theodore Roosevelt had begun in late 1901 to speak out
against the “real, grave evils” in the rapidly spreading trusts, and in 1902 had
instructed his Attorney General to file suit against J. Pierpont Morgan’s
Northern Securities firm. As recently as January of 1905, his administration
had slaughtered the so-called “beef trust” when the Supreme Court held for the
government in Swift & Co. v. the United States. The idea of a “streetcar
trust” made up of virtually all the major streetcar builders was 1890s
thinking, and no doubt died once cooler heads read the direction of the
country under Teddy Roosevelt. Good thing, too, because the next year (1906)
the trust-busters would take on Standard Oil, and in 1911, after exhausting
all legal avenues, Standard Oil would be held by the Supreme Court to be an
unlawful monopoly.

Interesting facts:

o

Initially the “combine” seems to have been structured as a holding
company that would acquire the several participating firms. Toward the end
it took on the appearance of a single company.

o

George Kobusch of the St. Louis Car Company is given credit for
conceiving the idea. [Read Young and Provenzo’s
History of
the St. Louis Car Company to get a good idea of the mind of
George Kobusch.]

o

Early on James C. Stewart, a St. Louis contractor, is given credit
for facilitating Kobusch’s conception. Later it is Thomas Ryan of
Philadelphia. And in the end it is Randal Morgan of Philadelphia, who is
completing the deal in Cincinnati !

o

Early on James C. Stewart is “expected” to head the combine, then W.G. Van Brunt, and finally Henry C. Ebert of Pittsburg.

o

Newspapers were
notoriously inaccurate in their reporting of companies involved (see
analysis below).